A Beginner’s Guide to Cryptocoin Mining

Is it worth your time to mine for cryptocoins?

Mining cryptocoins is an arms race that rewards early adopters. Bitcoin, the first decentralized cryptocurrency, released in early 2009. Similar digital currencies have crept into the worldwide market since then, including a spin-off from Bitcoin called Bitcoin Cash.

BTC Keychain / CC by 2.0 / Flickr
Which Alt-Coins Should You Mine?

If you had started mining Bitcoins back in 2009, you could have earned thousands of dollars by now. At the same time, there are plenty of ways you could have lost money, too.

Bitcoins are not a good choice for beginning miners who work on a small scale. The current up-front investment and maintenance costs—not to mention the mathematical difficulty of the process—don’t make it profitable for consumer-level hardware. Today, Bitcoin mining is reserved for large-scale operations only.

Litecoins, Dogecoins, and Feathercoins, on the other hand, are three Scrypt-based cryptocurrencies that are the best cost-benefit for beginners.

Dogecoins and Feathercoins would yield slightly less profit with the same mining hardware but are becoming more popular daily. Peercoins can also be a reasonably decent return on your investment of time and energy.

As more people join the cryptocoin rush, your choice could get more difficult to mine because more expensive hardware will be required to discover coins. You must heavily invest if you want to stay mining that coin or take your earnings and switch to an easier cryptocoin.

Be sure you are in a country where bitcoins and bitcoin mining are legal.
Is It Worth It to Mine Cryptocoins?

As a hobby venture, cryptocoin mining can generate a small income of perhaps a dollar or two per day. In particular, the digital currencies mentioned above are accessible for regular people to mine, and a person can recoup $1,000 in hardware costs in about 18 to 24 months.

As a second income, cryptocoin mining is not a reliable way to make substantial money for most people. The profit from mining cryptocoins only becomes significant when someone is willing to invest $3,000 to $5,000 in up-front hardware costs, at which time you could potentially earn $50 per day or more.

Set Reasonable Expectations

Suppose your objective is to earn substantial money as a second income. In that case, you are better off purchasing cryptocoins with cash instead of mining them and then tucking them away in the hopes that they will jump in value like gold or silver bullion. If your objective is to make a few digital bucks and spend them somehow, you might have a slow way to do that with mining.

Smart miners keep electricity costs to under $0.11 per kilowatt-hour; mining with 4 GPU video cards can net you around $8.00 to $10.00 per day (depending upon the cryptocurrency you choose), or around $250-$300 per month.

The two catches are:

The up-front investment in purchasing 4 ASIC processors or 4 AMD Radeon graphic processing units.
The market value of cryptocoins.

There is a slight chance that your chosen digital currency will jump in value alongside Bitcoin at some point. Then, possibly, you could find yourself sitting on thousands of dollars in cryptocoins. The emphasis here is on “small chance,” with small meaning “slightly better than winning the lottery.”

If you do decide to try cryptocoin mining, proceed as a hobby with a small income return. Think of it as “gathering gold dust” instead of collecting actual gold nuggets. And always, always, do your research to avoid a scam currency.

How Cryptocoin Mining Works

The focus of mining is to accomplish three things:

Provide bookkeeping services to the coin network. Mining is essentially 24/7 computer accounting called “verifying transactions.”
Get paid a small reward for your accounting services by receiving fractions of coins every couple of days.
Keep your personal costs down, including electricity and hardware.
The Laundry List: What You Need to Mine Cryptocoins

You need eight things to mine Litecoins, Dogecoins, or Feathercoins.

A free private database called a coin wallet: It’s a password-protected container that stores your earnings and keeps a network-wide ledger of transactions.
A free mining software package: Opt for one like this driver from AMD, typically made up of cgminer and stratum.
A membership in an online mining pool: A mining pool is a community of miners who combine their computers to increase profitability and income stability.
Membership at an online currency exchange: This kind of membership provides a forum where you can exchange your virtual coins for conventional cash and vice versa.
A reliable full-time internet connection: The ideal speed is 2 Mbps or faster.
A desktop or custom-built computer designed for mining: You may use your current computer to start, but you won’t be able to use the computer while the miner is running. A separate dedicated computer is ideal. Do not use a laptop, gaming console, or handheld device to mine. These devices aren’t effective enough to generate income.
An ATI graphics processing unit: Use a GPU or a specialized processing device called a mining ASIC chip. The cost is anywhere from $90 used to $3,000 new for each GPU or ASIC chip. The GPU or ASIC is the workhorse, providing the accounting services and mining work.
A fan: Use a household fan to blow cool air across your mining computer. Mining generates substantial heat, and cooling the hardware is critical for your success.
Wikimedia / Public Domain

You also need a strong appetite for reading and constant learning, as there are ongoing technology changes and new techniques for optimizing coin mining results. The most successful coin miners spend hours every week studying the best ways to adjust and improve their coin mining performance.

#Beginners #Guide #Cryptocoin #Mining